Tiscali 2007 Annual Report Download - page 101

sing companies for finance lease agreements.
For further details, see note 30.3.
36. Payables to suppliers
EUR (000) 31.12.2007 31.12.2006
Payables to suppliers 239,127 180,147
Payables to suppliers refer to trade payables for the supply of
services such as content, telephone traffic and data traffic. The
balance also includes EUR 6.5 million for the purchase of IRU
(
Indefeasible Right of Use ) concerning investments for the
unbundling project.
37. Other current liabilities
EUR (000) 31.12.2007 31.12.2006
Accrued expenses 76,927 78,106
Deferred income 65,269 11,908
Other payables 29,319 16,706
171,515 106,720
Accrued expenses include EUR 68.7 million relating to operating
expenses, such as costs for contents, costs for network access, costs
for professional consulting and costs for line rentals.
Deferred income mainly refers to the deferral of the capital gain
on disposal relating to the sale & lease back transaction on the
Sa Illetta property, amounting to around EUR 31.6 million (which
will be released in portions over 15 years corresponding to the
duration of the lease agreement), deferrals on IRU sales con-
tracts for around EUR 13.3 million and other deferrals on por-
tions of revenues, not pertaining to the period, for the activation
of ADSL services (deferred over a time span of 12 months) main-
ly relating to the Italian subsidiary.
The increase in this item with respect to the same period in 2006 is
essentially attributable to the afore-mentioned sale & lease back
transaction on the Sa Illetta property.
The item Other payables mainly includes payables due to the tax
authorities (VAT in the first instance) and due to welfare institu-
tions for a total of EUR 15.7 million, together with payables due
to employees totalling EUR 9 million and other payables for the
residual balance.
38. Financial instruments
38.1 Financial risk management objectives
The Group’s Corporate Treasury division provides business services,
co-ordinates access to the local and international financial markets,
and monitors and handles the financial risk associated with Group
operations by means of internal risk reports which analyze the expo-
sures by degree and magnitude of the risk. These risks include
market risks (inclusive of currency risks, fair value interest rate risks
and price risks), credit risks and risks in cash flow interest rates.
The use of financial derivatives is disciplined by policies appro-
ved by the Board of Directors, which provides written principles
on foreign exchange risks, interest rate risks, credit risks, on the
use of financial derivatives and non-derivative financial instru-
ments, and the investment of surplus liquidity. Consensus regar-
ding the policies and exposure limits is reviewed by the internal
auditor on an on-going basis.
38.2 Market risks
Group activities expose it primarily to the financial risk of changes
in exchange rates for foreign currency and to the interest rate.
38.3 Handling of the foreign exchange risk
Analysis of foreign currency sensitivity
The Group is mainly exposed to the UK currency (Great British
Pound).
The fluctuation of the English Sterling with respect to Euro influences
the various items in the income statement generated by the British
subsidiaries. As a consequence, it influences the contribution for fix-
ing the consolidated result of the period.
Moreover, Sterling fluctuations cause changes in the conversion
reserve, due to both the changes in the shareholders’ equity per-
taining to the subsidiaries, and to the exchange differences for cur-
rency infra-group financial receivables and payables.
38.4 Risk management linked with interest rate
The Group is exposed to the risk linked to the interest rate when the
Group companies raise loans either at fixed or floating interest rates.
The Group exposure to interest rates on financial assets and lia-
bilities is analyzed in the section on the handling of the liquidity
risk in this note.
Sensitivity analysis of the interest rate
The sensitivity analysis presented below was determined on the
basis of the exposure to interest rates of all the derivative and
non-derivative instruments as of the balance sheet date. With
regard to floating rate liabilities, the analysis was prepared by
presupposing that the amount of the unpaid liability as of the
balance sheet date had been in default for the entire year. An
increase or decrease equating to 70 basis points was used inter-
nally in order to take the fluctuation risk rate for interest back to
key management and represents management’s estimate of the
possible, reasonable change in the interest rates.
If the interest rates changed by more or less 70 basis points, and
all the other variables remained the same, the following would
occur for the Group: the interests for the year ended 31 Decem-
ber 2007 would have increased/decreased by EUR 0.8 million.
This is essentially attributable to the Group’s exposure to inter-
est rates on floating rate loans.
tassi di interesse nei prestiti a tasso variabile.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
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